In Tariff War, Brazil Still Beats the U.S. in Sales to China

The ongoing trade war between the United States and China gives Brazil a temporary competitive advantage. However, both the government and the private sector must remain vigilant, as this advantage could soon be used as a bargaining chip in negotiations to end the tariff dispute between the two countries. The warning comes from Marcos Jank, a professor at Insper Agro Global.

A study conducted by Jank and researchers Leandro Gilio and Victor Cardoso, also from Insper Agro Global, shows that the tariffs imposed by China on American products have reduced the competitiveness of the U.S. compared to other suppliers, such as Brazil. The research focused on the six main agricultural products that China imports from both countries: soybeans (92% is sourced from the U.S. and Brazil), corn (66%), cotton (76%), beef (55%), pork (31%), and poultry (64%).

In April, the U.S. and China escalated their tariff war, with Washington announcing tariffs of up to 145% and China responding with tariffs of up to 125% on U.S. goods. On May 12, both countries agreed to a 90-day truce, reducing their April tariffs by 115 percentage points, which would theoretically bring final tariffs to 30% (U.S. on Chinese goods) and 10% (China on American products).

In practice, however, Chinese tariffs on American goods remain higher than 10% and also higher than those imposed on Brazilian products, Jank points out. China currently charges 23% on U.S. soybeans, compared to 3% on Brazilian soybeans. For corn and cotton, the tariffs are 26% for the U.S. and only 1% for Brazil. On beef, China imposes a 12% tariff on Brazil and a 32% tariff on the U.S. The most extreme case is pork: the U.S. faces a 57% tariff, while Brazil is taxed at 12%.

Although the current scenario appears favorable to Brazil, caution is needed, Jank warns. “I believe these tariffs in place today are going to be used as a negotiation tool to pressure the U.S. into lowering the average 30% tariff it wants to impose on Chinese products,” he explains.

Jank notes that China has adopted targeted measures, striking sectors that are politically sensitive for President Donald Trump, such as grain producers in the U.S. Midwest. “China is also engaging in a dangerous practice — selecting which companies are allowed to export to its market,” he says. For corn, for instance, China has a quota of 7.7 million tons per year from the U.S. and allocated 4.4 million tons to Cofco, a Chinese state-owned company. “I wouldn’t be surprised if, in the future, China retaliates against shipments from American firms like Bunge and Cargill,” the professor adds.

For Brazil, the current conditions are favorable, but Jank believes it is crucial for both the government and the agricultural sector to monitor developments closely. “What today is a benefit for Brazil could soon become a bargaining chip. China is aiming to negotiate lower tariffs on its exports to the U.S., while the U.S., facing a $300 billion trade deficit with China, will also try to strike a deal to boost its exports to the country,” Jank concludes.

Source: Globo Rural

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